SUMMARYChennai-based public sector lender Indian Overseas Bank (IOB) is seeking shareholders’ nod to raise R398 crore from Life Insurance Corporation

Chennai-based public sector lender Indian Overseas Bank (IOB) is seeking shareholders’ nod to raise R398 crore from Life Insurance Corporation (LIC) on a preferential share allotment basis.The bank will allot 8,15,00,000 equity shares of R10 each for cash at an issue price of R48.84 per equity share (including a premium of R38.84), aggregating to R398.04 crore. The bank has called for an extraordinary general meeting (EGM) on February 26 to secure the shareholders’ approval.Though IOB’s capital-adequacy ratio had improved to 10.99% after the government's infusion of R1,200 crore, it still requires close to R1,000 crore to meet the capital requirement this fiscal under Basel III. With the bank geared up to get R398 crore LIC, it will also look to other avenues like perpetual bonds to fill the gap.In a communication to shareholders, the bank said that though the LIC had agreed to subscribe to equity capital of the bank on a preferential basis to the extent of R426 crore, it would be only allotting shares of R398.04 crore to restrict their holding within 15%. “The capital raised would be utilised to shore up the capital adequacy of the bank and to fund general business needs,” it said. Currently, LIC holds 8.75% in the bank and after the issue of shares, it will go up to 14.77%. The main promoter, the government of India, holds 73.8% in IOB while the remaining 11.43% is held by the public.IOB reported a 35.56% drop in its net profit at R75.07 crore for the third quarter against R116.50 crore for the same period of the previous fiscal year.